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How to Trade Commodities?

The online commodity trading platform lets you invest in precious metals as well as daily necessities and earn profit each time their value increases or decreases. While long-term trades allow you to profit from price increases, short-term trading lets you buy high and sell low.

Trading online in commodities is an effective method to hedge against geopolitical and inflationary events. Investors can also diversify their portfolios, significantly lowering their risk of squandering capital. The market for commodities generally works in opposition to the capital markets. For instance, if inflation rises or GDP declines, the shares of companies could slide, while commodities may show extraordinary strength.


How to Trade in the Commodity Market?

To start with commodity trading you need to follow some of the steps given below:

1. Select a broker

There are plenty of brokers, but one that suits your trading style, offers technology along with reasonable brokerage charges. You need to find an idle broker that also has good customer support and receives quality feedback from its users. There are 2 sorts of brokers. First are the full-service broker and the discount broker. The stark contrast between these two broker types is the service & cost. A full-time service broker provides value-added service along with some extra fees. Whereas the discount broker offers low brokerage and a platform to do trades cutting down on the value-added service. Depending upon your trading goal, you can opt for any broker that can work for your investments.

2. Open Trading account

The next step for entering the stock market is opening a demat and a trading account. You can open a demat & trading account in a jiffy on Share India's platform. It offers a hassle free demat account opening process along with many features and trading tools to explore & implement in your trade. All that is required as a proof is your Aadhar card with your mobile and the number linked to it, along with your Pan Card.

3. Do Initial Deposit

The commodity trade is all about futures and options contracts. For a starter, you need to add some funds to enter a contract with an initial margin. For example, if a xyz contract has a value of Rs.10,000/- you can add Rs.100/- by adding a minimum margin before you can start your position in the trade. But note that you need to have a maintenance margin which is essential to compensating for any losses whenever the trade goes sideways.

Factors Influencing Commodity Prices

Demand and Supply: Commodity prices are greatly affected by the dynamics of supply and demand. When the demand for a particular commodity is higher than the supply, prices will increase, and when supply is higher than demand the prices will fall.


External Factor: War, political instability, as well as natural disasters, could be a major influence on commodities markets, focusing on the precious metals and energy markets.


Changes in currency: The prices of commodities are typically accounted for in U.S. dollars and INR values, so fluctuations in the value of dollars and rupees could affect the price of commodities.


Economic conditions: Commodity prices are also dependent on global economic conditions such as the rate of economic growth, inflation and interest rates.


Technological advances: Technological developments in the fields of agriculture, energy production and mining may affect the demand and supply of diverse products. Policies of the Government: The policies of the government like regulations for exports and imports as well as subsidies and tariffs can affect the demand and supply of commodities.


Speculation: Speculation made by investors and traders may influence the prices of commodities as they can buy and sell commodities based upon anticipated price changes rather than fundamentals of supply and demand.

Technical analysis: Utilize tools for the analysis of technical data to discover patterns, trends and levels of support and resistance which could signal potential price fluctuations. Diversify: Your portfolio should be diversified by investing in several commodities that can reduce risks and increase the chance of earning profits.


Manage risk: You can manage the risk by setting stop-loss orders to limit losses and avoid taking on excessive leverage. It is equally important to be prepared with a proper, definitive plan for risk management.


Hire professional: Get professional advice Take assistance from a professional financial adviser or expert in commodity trading to assist you in navigating the market and make better trade choices.


courtesy to : shareindia

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